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Hon Mathuki at planning workshop
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20th EABC Annual General Meeting
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East Africa Business Council receives grant from TradeMark East Africa, to reduce barriers to trade in the EAC
East Africa Business Council receives grant from TradeMark East Africa, to reduce barriers to trade in the EAC
East Africa Business Council receives grant from TradeMark East Africa, to reduce barriers to trade in the EAC

EABC WEBINAR ON EAC PARTNER STATES 2020/21 BUDGET EAC REGIONAL POST-BUDGET DIGEST 16TH JUNE 2020 14.00HRS-16.00HRS EAT VIA MICROSOFT

 EAST AFRICAN BUSINESS COUNCIL

EABC WEBINAR ON EAC PARTNER STATES 2020/21 BUDGET

 EAC REGIONAL POST-BUDGET DIGEST

 16TH JUNE 2020 14.00HRS-16.00HRS EAT VIA MICROSOFT

 

REPORT

  • INTRODUCTION:

On 11th June 2020, three EAC Partner States i.e. Kenya, Tanzania and Uganda jointly unveiled their Budgets for the Fiscal Year 2020/21. In efforts to harmonize fiscal measures in the region, EAC Partner States have agreed to release their budgets on the same day in June each year with Burundi in progress to align its fiscal year with the other EAC Partner States. South Sudan as a new member of EAC has not commenced the implementation of EAC commitments. This year Rwanda agreed to read its budget on 18th June 2020.

 

The major focus of EAC budgets was mainly to stimulate economic growth and recovery after being adversely affected by COVID-19 which first emerged in EAC from February 2020. Some EAC Partner States developed measures aiming at mitigating the impact of the COVID19 pandemic on businesses and East Africans with a focus on keeping businesses afloat. This year the three EAC Partner States have the same theme for their budgets which is “Stimulating the Economy to Safeguard Livelihoods, Jobs, Businesses and Industrial Recover”.

 

Aiming at unpacking the budgets, the East Africa Business Council (EABC) organized a webinar on regional post-budget digest which exhaustly discussed the regional economic outlook, analyzed fiscal and monetary measures proposed for 2020/21 as well as various opportunities presented by the budgets and areas of improvement through Public-Private Dialogue. The webinar went further to assess how the outlined budget measures meeting the private sector’s expectations amidst the COVID-19 pandemic.

 

2.0 OBJECTIVES OF THE WEBINAR

 

The main objectives of the Webinar were to assess how the outlined budget measures for the fiscal year 2020/2021 meeting the private sector’s expectations amidst the COVID-19 pandemic and examining the implications of fiscal & monetary measures on East African businesses and the regional economic growth.

 

 

  • PANELISTS/PARTICIPANTS:

The Webinar attracted participants from the business community across EAC, Tax experts, EAC Secretariat, EAC Public sector and Development Partners in the EAC region. The high-level panelists for the webinar included: Mr. David Tarimo, Country Senior Partner, PwC Tanzania; Mr. Vimal Shah, Chairman, BIDCO Africa; Ms. Aggie Asiimwe Konde, Vice President, Program Development & Innovation Alliance for a Green Revolution in Africa (AGRA) Kenya; Mr. Kenneth Bagamuhunda;  Director-General: Customs & Trade, EAC; Prof. Maggie Kigozi, Chairperson, Zuri Model Farm Limited Uganda.

 

 

4.0 OPENING OF THE MEETING:

In his remarks, Dr. Peter Mathuki, the EABC Executive Director and the Moderator of the meeting invited and thanked the panelists for creating time to participate in the Webinar and share the content of budgets. He invited all participants and urged them to actively participate in the webinar by sending questions in the chat rooms for relevant panelists to respond. He insisted that the objective of the webinar was to unpack the EAC Partner States’ budgets with the aim of assessing them how will cushion businesses and East Africans as well as stimulate economic growth amidst COVID-19 pandemic.

He informed the meeting that last week EABC lost long-serving EABC Director and Goodwill Ambassador Keli Kiilu. He requested all participants to observe a minute of silence to honor his passion for EAC integration and linking of the private sector in the region.

5.0 KEY HIGHLIGHTS/OBSERVATIONS FROM THE DISCUSSIONS:

  • Observed that the EAC Partner States jointly read budget on the same day as one of the efforts to harmonize fiscal policies in the EAC region,
  • Noted that the uniqueness of the 2020/21 EAC Partner States budgets was the outbreak of COVID-19;
  • Observed that this fiscal year all EAC Partner States were projecting lower economic growth than what was achieved last year;
  • External debt funding may drag regional economic growth as it forms a large proportion of budget;
  • Tourism sector being main foreign exchange earner for the region has been adversely affected by COVID-19 pandemic;
  • It was observed that COVID-19 is global reality East Africans should learn to live with for sometimes;
  • COVID-19 pandemic is considered as both crisis and business opportunities;
  • EAC Private sector expectations are beyond Budgets which is making EAC integration a reality through allowing free trade, free movement of goods, services and people;
  • COVID-19 should be considered as an opportunity to localize supply chain, production and digitalize EAC economies;
  • EAC should use the COVID-19 to produce competitively not only for the region but for entire Africa by taken advantages of AfCFTA and export globally;
  • It was noted that agriculture was well prioritized in the budget but need an inclusive approach to address market access, storage facility and supply chain challenges as well as transaction cost;
  • It was observed that although tEAC Partner States have increased their agriculture budget it still less than 3% of the total budget against 10% agreed under the Malabo Declaration on Agriculture Development and Transformation;
  • It was observed that for African countries to easily absorb various shocks such as COVID-19 pandemic. Drought, floods and locust requires consistence investment and development of agriculture;
  • East African Governments need to create a conducive environment to attract the private sector to invest in the remaining gap in the agriculture sector;
  • The COVID-19 bring an opportunity to reduce the cost of doing businesses in the region;
  • It was observed that existences of the Stay of Applications (SOAs) and Country’s Specific Duty Remission in the current budgets aimed at cushion vulnerable sectors, protect industries as well as  enhance manufacturers and production;
  • It was observed that SOAs and Country’s Duty Remission impede intra-EAC trade as final goods cannot access the regional market at preferential tariff treatment
  • It was noted that the SOAs and Country’s Duty Remission hamper competitiveness, create an unlevel field and have distortionary effect;
  • COVID-19 has created fertility ground for concluding comprehensive review of EAC CET as Partner States have achieved some commonalities on maximum tariff or the level of protection they require;
  • It was observed that Stay of Application on EAC CET is the wrong way to go for EAC
  • It was noted that harmonization of fiscal harmonization including harmonization of domestic taxes is the foundation of all stages of EAC integration;
  • It was observed that hindrance on harmonization of domestic taxes has been caused mainly Partner States reliance on external sources and minimum involvement of the private sector in the harmonization processes;
  • It was observed that the Partner States are hesitant to harmonize domestic taxes because of tax policy space they require (Prefer to remain sovereignty on domestic taxes)
  • It was observed that all EAC Partner States’ budgets have focused on industrialization for the purpose of archiving self-reliant;
  • It was observed that the Partner States are promoting national value chain but not in the harmonized manner;
  • Observed that national initiatives on local content are disconnected to the regional value chain;
  • It was observed that in the EAC region SMEs have been hit hard by the COVID-19 pandemic
  • It was observed that diversification is key for SMEs to sustain their businesses during COVID-19 pandemic;
  • It was observed that for SMEs to sustain their businesses Partner States should enhance finance and market access,
  • It was observed that to cushion SMEs against the effects of the COVID-19 pandemic, EAC Partner States should establish both Regional and National Relief Fund for SMEs;
  • It was observed that AfCFTA is coming soon and the region should prepare for it’;
  • It was observed that the COVID-19 pandemic has taught the EAC region to consolidate its integration fundamentals especially social sectors
  • It was observed that there is a need to link health with trade and economic sectors to avoid significant disruption of economic activities during the emergence of crises.

6.0 KEY RECOMMENDATIONS FROM WEBINAR:

  • To stimulate economic growth EAC Partner States should continue investing in infrastructure, inject more liquidity in the economy and Government hasten payment of pending bills to the private sector and VAT refund,
  • COVID-19-pandemic should catalyze further EAC integration, digitalize economies, diversify manufacturing and foreign exchange earnings;
  • To mitigate the impact of COVID-19 to businesses EAC Partner States handle global trade and supply chain as a bloc;
  • EAC Partner States should give tax relief to the digital platform as it's at nascent stages
  • EAC Partner States should create a conducive environment for the private sector to invest in agriculture;
  • There is a need to enhance Public-Private Dialogue in order to come up with better policy for the agriculture sector;
  • Partner States need to finalize the review of EAC Common External Tariff (CET) in order to do away with Stay of Application and Country’s Specific Duty Remission
  • Private sector in the region to enhance involvement in the harmonization domestic taxes;
  • Partner States should promote value chain at a regional level in order to link producers across the region and enhance their interlinking
  • Public and Private Sector should work together to map out and identify critical sectors for regional value chain promotion;
  • EAC Partner States should establish a regional Relief Fund to cater to SMEs dealing with Exports and Cross border trade & investment; as well as the National Relief Fund to cater National SMEs;
  • SMEs should embrace ICT as one way of mitigating the impacts of COVID-19 pandemic
  • Partner States to enhance training of the workforce to enable SMEs to embark on diversifications;
  • Partner States should make tax regime simple, transparent and predictable to SMEs;
  • For the private sector to focus on value addition and industrialize the region, Partner States should provide industrial park services;
  • Partner States should create long-term better policy to attract more investment;
  • To promote local content EAC Partner States should complement each other based on their competitive advantages and take advantage of the larger market created by EAC;
  • EAC Partner States should approach the AfCFTA as a regional bloc;
  • There is a need to create strong relationships among the social sector, productive sector and trade in order to minimize disruption during the crisis in the region;
  • Private sector should be involved in the development of the East African Regional Recovery Strategy.

END

 

 

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